The last Israeli tanks moved out of Beit Hanoun yesterday, exposing the worst destruction since the military assaults on Jenin and other West Bank cities more than a year ago.

Palestinians who returned to the small Gaza town occupied by the Israeli army for six weeks found that armoured bulldozers had levelled dozens of homes and factories, torn up roads and uprooted trees, up to the edge of the only public border crossing from Israel into the Gaza strip.

"I don't know why they destroyed it," said Mohammed Bishara who found his house flattened. "The Israelis say they had to do this because Hamas was firing rockets from here but they weren't. Everybody knows they were using the fields. Anyway, they destroyed my house and it didn't stop the rockets so I think it means they wanted to punish me for what Hamas does."

The Israelis said they went into Beit Hanoun to stop Hamas firing home-made rockets, known as Qassams, into Israel. It suits both sides to portray the rockets as fearsome but after more than 2,000 firings not one person has been killed and most miss their target by a long way.

The army said much of the town had been destroyed for "security reasons".

Yesterday, the Israelis completed their pullout and began lifting the checkpoints following the ceasefire declaration by Hamas, Fatah and Islamic Jihad after nearly three years of intifada.

But the killing continued on the West Bank as the Al-Aqsa martyrs brigades faction, which has not signed up to the ceasefire, shot a Romanian working with an Israeli construction team. The shooting was not seen as an immediate threat to the truce.

In Beit Hanoun, there was relief at the Israeli withdrawal, although in Gaza the ceasefire is seen as a lull in the conflict.

As well as destroying homes, the Israelis ripped up 1,000 acres of citrus trees that once made the town one of the more prosperous in Gaza.

The farmers began replanting a few days ago as the deal for the Israeli pullout was in the works, but it will take 10 years before they bear fruit.

"It's nothing less than economic sabotage," said Abdel-Rhanan al-Masri, Beit Hanoun's representative to the Palestinian parliament. "We have lost three-quarters of our trees to the bulldozers. Our industry is destroyed. We have no doubt why. It was collective punishment - and in clearing our trees, the bulldozers cleared the path for the Israeli citrus industry."

The destruction stops at the edge of a petrol station. Khader Massoud worked as the attendant when the tanks rolled in. He came back yesterday. "The tanks destroyed the forecourt right up to the door and the front two pumps are shot up," he said. "But the other two pumps are fine and we still had petrol so I started selling right away."

There is little sign that the fruit and vegetable processing plant was next door ever existed. All that remains is a jumble of earth and concrete.

Mr Massoud has no time for the Israelis but he is also scornful of Hamas. "People are very angry about the Qassam rockets because it brings destruction to us. People want to live, to survive, to be able to work. We don't want them to fire more rockets," he said.

Last month, a few dozen residents took to the streets to protest against Hamas firing rockets. But there was only one protest. Some Palestinians said people were too frightened of Hamas to do it again.

Netzarim junction, to the south of Beit Hanoun, became notorious early in the intifada as the place where the Israeli army shot a terrified 12-year-old boy, Muhammad Dura, as he clung to his father.

The road at Netzarim junction has been closed for 18 months, forcing tens of thousands of people to make a 45-minute detour through Gaza city for what should be a five-minute drive. This was in order to "protect" 60 ideological fundamentalist Jewish families on a nearby settlement.

Yesterday, the road was reopened, although the Israeli army has only pulled back 100 metres to a large concrete pillbox. Beside the road, the Palestinian police erected a small green tent with a flag on a pole and a portrait of Yasser Arafat at the entrance.

The Jewish settlers were not happy, among them Shlomit Ziv who moved to Netzarim 10 years ago. "There have been numerous attacks on this road - shootings, road bombs, bomb-laden carts and donkeys. And after each attack the road is closed for a few months, then reopened until the next attack," she said.

The Palestinians are well used to clearing up after Israeli destruction. A lorry from the Palestinian energy authority drew up next to some of the downed power lines. Mohammed Al Kafarna was driving a mechanical shovel clearing the rubble. "It's the third time I've cleared up Beit Hanoun. I don't think it's the last," he said.

· Israel yesterday cut its contacts with the BBC over what it termed coverage akin to the worst "Nazi propaganda". Officials described as "the last straw" a documentary on alleged nuclear and chemical arms programmes that was shown abroad at the weekend. The BBC will no longer be granted interviews with government officials but will be allowed to attend government news conferences.